The US stock market has plummeted to its lowest level since November 2020 as Fed officials maintained their hawkish stance and turmoil in Europe continued to worry investors. Yesterday, the S&P 500 dropped by as much as 2.9% but has won back some losses in today's morning session. Such a deep decline wipes out all the previous attempts of the index to recover after a six-week fall. The high-tech Nasdaq 100 slumped by nearly 4% after St. Louis Fed President James Bullard said that investors have now realized that they can't escape additional rate hikes in the coming months.

Meanwhile, US Treasuries pared their early losses while the 10-year Treasury yield stayed at the level of 3.76%. For your reference, the US 10-year yield declined slightly after reaching its high of 4.015% that was last seen in October 2008. Despite a slight correction, US Treasuries are still headed for their biggest annual loss since 1973. In the UK, the cost of government bonds with a 30-year maturity period slumped by as much as 72 basis points to 4.26%. Earlier, it surged to the highest level since 1998 before the Bank of England signaled its intention to purchase bonds to stabilize the situation.

According to fresh data, inflation in Germany has exceeded 10% and the country agreed to cut energy consumption which could only add to inflationary pressures. This situation pushes the European Central Bank to follow the steps of its American counterpart. Investors are struggling to track the uncoordinated moves of central banks as the Fed and the ECB are determined to pursue further monetary tightening while the Bank of England has unveiled a plan to support government debt. In the meantime, monetary authorities in Asia are trying to support their weakening currencies.

As was mentioned above, the Fed officials continue to warn markets that more rate hikes are coming which will hurt the economy even more in the near term. Cleveland Fed President Loretta Mester echoed the rhetoric that her colleagues reinforced this week. Yesterday, after US markets closed, San Francisco Fed President Mary Daly, said the central bank should curb inflation in a manner that avoids a difficult downturn.

As for the political background, the European Commission announced the eighth package of sanctions that will include a price cap on Russian oil exports as Russia signaled it would go ahead with the annexation of Ukrainian territories.

Regarding the technical outlook for the S&P 500, traders managed to regain control over the level of $3,643 after yesterday's sell-off. Their next target is the level of $3,677 which still makes an upside correction possible. While testing the bottom, bulls will need to return the price to $3,677and $3,706 to develop a proper correction. Only then will it be possible for the price to head towards $3,735. A breakout of this range will add fuel to the upside momentum to the target of $3,773. The level of $3,801 will act as the most distant target. In case of a decline, a breakout of $3,643 will quickly push the price to $3,608 and will pave the way to retest the support of $3 579. Then we can expect a stronger sell-off below this range and a decline to the area of $3,544 where the pressure may slightly ease.